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  • National Disability Insurance Scheme

    If you're a participant or a nominated representative under the National Disability Insurance Scheme, payments you receive are tax free. Deductions can't be claimed for expenses incurred or assets paid for by the scheme. You may also have tax and super obligations in certain circumstances.

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    The scheme

    The National Disability Insurance Scheme (NDIS) provides support for Australians with disability, their families, and their carers. Australians under the age of 65 who have a permanent and significant disability are provided with reasonable and necessary supports to enjoy an ordinary life.

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    Payments to participants

    If you're a participant under the NDIS:

    • the payments for supports you receive as a participant (including funds that are to be self-managed) as part of your participant's plan are tax free
    • you cannot claim deductions for expenses you incur or assets you buy.

    You may be eligible to claim the net medical expenses tax offset if you use your own funds to pay for certain medical expenses not covered by the scheme.

    If the payments you receive are applied to the purchase of assets and those assets are subsequently used to produce income – for example, rented out – that income will not be tax-free as a payment under the NDIS. There may also be capital gains tax (CGT) implications – for example, if you use funds to modify your house and you also receive rental income from the house, the house modification will affect the CGT cost base.

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    Participants hiring support workers

    The scheme lets you choose to self-manage all or part of your budget. This includes being able to hire and pay for your own support workers directly, without using an agency or third party. If you decide to hire a support person directly, you may be required to withhold tax from any payments you make to them.

    Your withholding obligation depends on whether the workers you hire are employees or contractors. If your worker is an employee you have to work out the amount of tax to withhold from payments you make to them. You may need to pay superannuation.

    You generally don't need to withhold amounts from payments you make to contractors, unless there is a voluntary agreement with the contractor to withhold tax.

    You can check whether your worker is an employee or contractor for tax and super purposes by reviewing your working arrangements using our Employee/contractor decision tool.

    If you need to withhold tax from the payments made to your workers, apply for a PAYG withholding account so you can send the tax you withhold to us. You can work out how much to withhold by using our tax withheld calculators.

    You must register for PAYG withholding before you're first required to withhold an amount from a payment to your worker, usually before you pay them for the first time.

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    Nominated representative for participants

    Nominated representatives or registered plan management providers who manage a participants' plan to receive scheme funding may have:

    • income tax obligations
    • limits to the deductions they can claim
    • additional recordkeeping requirements.

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    Last modified: 10 Dec 2018QC 42339